D245 plurel

PLUREL D2.4.5 November, 2010

PERI-URBAN LAND USE RELATIONSHIPS STRATEGIES AND SUSTAINABILITY ASSESSMENT TOOLS FOR URBAN-RURAL LINKAGES, INTEGRATED PROJECT, CONTRACT NO. 036921

Land Use Relationships in Rural-Urban Regions Module 2

D2.4.5 November, 2010

Economic Evaluation of the Land-Use Transport Relationship in the European Region

Costs and Benefits Related to Evaluation of Rapid Rail Investments on Urban Form and Development

Eda Ustaoglu, Brendan Williams* *Corresponding author; NUID UCD; Participant No.16 Tel: 00 353 1 7162765; E-mail: [email protected] Document status: Draft: completed Submitted for internal review: completed Revised based on comments given by internal reviewers:

completed

Final, submitted to EC: completed

Page 1


Contents Abstract 3 Introduction 8 1. Research Context 9 2. Evaluation Methodologies in Assessing Transport- Land Use Policies 11 2.1. International Comparison of Evaluation Methodologies 11 2.2. Comparison of Cost-Benefit Methodologies in Europe 14 3. Methodology for evaluating the Land Development Impacts of Rapid Rail Investments 20 3.1. Specification of Impacts and Indicators 20 3.1.1. Direct Impacts 20 3.1.2. Socio-Economic Impacts 20 3.1.3. Transport Network Effects 23 3.1.4. Energy and Environmental Impacts 23 3.2. Implementation of CBA for Impact Evaluation of Rapid Rail Investments 24 3.2.1. Scenario Analysis for the CBA 24 3.2.2. Specific Issues in Impact-Indicator Evaluation 25 3.2.2.1. Capital Cost Estimation of Rail Investments 25 3.2.2.2. Valuation of Traffic Safety 27 3.2.2.3. Vehicle Operation Costs 29 3.2.2.4. Value of Time 30 3.2.2.5. Environmental Impacts 32 3.2.2.6. Public Service Provision Costs 35 3.2.2.7. CBA Evaluations 35 4. Conclusion 37 References 38


Abstract Objectives The current report has been prepared in the framework of PLUREL Work Package 2.4: Spatial Development Strategies and Scenarios (Planning Policy Options). The objective of this Work Package (WP) is to develop scenarios as an input to the stakeholder-based scenario workshops undertaken in WP3.4. In line with this purpose, development scenarios for urban-rural region types have been determined by generic urban-rural region typologies in WP2.1 which assist in developing urban-rural region dynamics scenarios considering the existing and emerging driving forces for change and development in these regions. A generic methodology for the evaluation of the case study scenarios regarding implementation costs in the regions will be carried out in this report as part of the objectives of the WP2.4. Methodology The methodology utilised in this report is based on an international literature review to identify and prioritise a specific number of impacts and indicators for the economic evaluation of the sustainability of transport-land-use relationships in the Plurel Regions. In this respect, a generic methodology is developed and proposed for the scenario-based impact evaluation of rapid rail investments in the European Region, particularly in the Plurel case study areas. The land use impacts of a do minimum scenario is compared with a with rail scenario; the former implying a more dispersed urban growth compared to the more compact forms of urban development potentially achieved through the land development impacts of rapid rail investments. A Cost-Benefit Analysis (CBA) approach is the suggested methodology for the evaluation of the impacts of these two alternative scenarios. Results The report identifies four main types of criteria for the CBA evaluation of the impacts including direct impacts of transportation infrastructure provision, socio-economic impacts, transportation network effects, and energy and environmental impacts. The values and parameters for the appraisals of capital costs, public service provision costs, accident rates, vehicle operation costs, system operating cost and revenues, travel time and costs of carbon dioxide emissions and local air pollution are specified for the evaluation of rapid rail investments within a scenario analysis framework. The data requirements for the impact evaluation of the with rail and the baseline do-minimum scenarios are identified and given as follows:


Impacts/Indicators Impact Evaluation Data Requirements of With-Rail Scenario vs. Baseline Do-Minimum Scenario

1. Capital Costs of Rail Infrastructure Investment

Direct construction cost estimates include the following: -Land acquisition costs -Civil engineering works -Railway infrastructure -Operational systems -Stations -Planning and design

2. Provision of Public Services

Future estimated numbers for new residential development (numbers of new housing units) in the case study area within the appraisal period specified for rapid rail investments

3. Accident Rates/Future Accident Risks

Three types of data are required: -The most recent data related to the number of personal fatality, serious injury,

and minor injury accidents along the catchment area of the newly proposed rail line

-Estimated numbers for future accident risks from the national and local accident rates and trends -Quantification of changes in the number of fatalities, serious injuries, and slight

injury accidents due to a rapid rail investment by using country specific risk functions

4. Change in Road Vehicle Operation Costs

For the calculation of the economic benefits (costs) associated with vehicle operating costs, two types of data are required: -Demand: the number of private vehicles (cars) making a particular origin-

destination trip for the do minimum scenario and the alternative with rail scenario ( peak/off-peak traffic flow data for the baseline and alternative scenarios)

-Vehicle kilometres-total change in vehicle kilometres from the local highway network for the do minimum and with rail cases

5. Change in Travel Time

Estimates related to; -Travel time-change in travel time for private vehicles (cars) in peak/off-peak

traffic for the baseline and with rail scenarios -Demand: peak/off-peak traffic flow data for the baseline and with rail cases

6. Rail Operating Costs and Revenues

-Expected operating pattern and service frequency of newly proposed rapid rail system

-Key characteristics (route length, journey time, peak and off-peak headway etc.)

7. Change in Area Land Values

-Amount of greenfield/empty land within the catchment area of new rail line (in hectares).

-Amount of other land-uses i.e. commercial, industrial, residential and mixed-uses within the zoning suitability for development catchment area of new rail line (in hectares).

8. Change in CO2/Local Air Pollutants

-Total change in greenhouse gas emissions (i.e. CO2 , in particular)/local air pollutants (NOx, SO2, PM2.5 etc.) for the baseline and with rail cases.

The impact valuation methods are also identified for each impact and indicator and specified particularly for each EU country where relevant information is available. In this sense, values for traffic safety, travel time and carbon dioxide emissions are available for all the EU countries while vehicle operation costs are only provided for the UK given that vehicle operation costs are more generic and transferrable between the EU countries. Capital costs of transport infrastructure, system operation costs and revenues, public service provision costs, and area land values are highly case specific; and therefore, detailed information is required on these cost items for the valuation of the subject indicators. Therefore, some important issues on these case specific costs are highlighted in this report in general terms which will provide a base for future research regarding the valuation of these indicators. Followed by the impact-indicator evaluation data requirements and valuation methods, CBA will be carried out utilising the Economic Net Present Value


(ENPV) approach which computes NPV of marginal costs and benefits between baseline do-minimum and with rail scenarios. The ENPV formula is as follows:

n

tnnn

tt rcb

rcb

rcbSaENPV

0111

000

1...

11

Where St is balance of cash flow funds at time t comprising flow of benefits, , and flow of costs, ; is discount factor,

tb

tc ta r is discount rate, and n is the evaluation period. This is also used to produce a benefit-cost ratio and internal rate of return (IRR). The former is the ratio of the discounted aggregate net benefits (i.e. benefits minus costs) to the discounted investment costs. On the other hand, IRR is the rate of discount equating discounted net benefits to discounted investment costs. Finally, a common sensitivity testing criteria is specified for a number of indicators to test unexpected changes and uncertainties in the parameter values. This is a preliminary sensitivity analysis suggested in this report and more detailed analysis is required based on the characteristics of the transport infrastructure investment and the study area, both influencing the impact-indicator calculations and valuations. Popular Science Description The issues of transportation provision and land development have gained importance in many countries, and particularly the issue has become significant for regions with recent economic development such as Plurel case study areas. The rapid growth taking place especially in peri-urban areas has resulted in significant consequences on the development of the urban environment. Most of the cities have experienced dispersed or scattered type of development often referred to as urban sprawl in contrast to their more compact structures which evolved until the 1950s. The sprawl type of development in the built-up area is generally associated with high social, economic and environmental costs. In this respect, sustainable urban development strategies and policies have gained importance among scholars, practitioners and policy makers to minimise undesirable impacts of sprawl type developments in the urban areas. The literature has shown that rail transport systems can play a critical role in overcoming the problems posed by the dispersed or sprawl type development patterns (see Newman, 1995). These developments can provide high quality services in terms of reliability, speed, safety, and reduced travel time and act as a substitute for private car use. Consequently, rapid rail transportation has become a preferred policy approach for avoiding road congestion and other detrimental effects of urban sprawl. Considering that rapid rail systems are significantly costly investments and place a burden on the governments finances, an impact evaluation of rapid rail investments and land-use relationship is highly required not only for governments budgetary planning and control, but also for evaluating wider impacts of such developments on the general welfare. Given this framework, this report develops a generic scenario-based CBA methodology for the impact evaluation of rapid rail provisions on urban form and development for the EU countries, particularly for the Plurel Regions.


Classification of Results/Outputs:

For the purpose of integrating the results of this deliverable into the PLUREL Explorer dissemination platform as fact sheets and associated documentation please classify the results in relation to spatial scale; DPSIR framework; land use issues; output indicators and knowledge type. Spatial scale for results: Regional, national, European

(International literature + European case

study level)

DPSIR framework: Driver, Pressure, State, Impact, Response

(Economic evaluation of the impacts of

different transport-land-use relationships through the scenario analysis)

Land use issues covered: Housing, Traffic, Agriculture, Natural area, Water, Tourism/recreation

(Integrated system of transportation and

land-use development)

Scenario sensitivity: Are the products/outputs sensitive to Module 1 scenarios?

(Yes, the indicators are scenario sensitive

and since the scenario analyses are based on M1 modelling inputs, the

present study is indirectly based on M1 modelling inputs )

Output indicators: Socio-economic & environmental external constraints; Land Use structure; RUR Metabolism; ECO-system integrity; Ecosystem Services; Socio-economic assessment Criteria; Decisions

(Inputs for the Cost-Benefit methodology

in relation with the socio-economic assessment of the impacts of different

transport-land-use relationships)

Knowledge type: Narrative storylines; Response functions; GIS-based maps; Tables or charts; Handbooks

(Text, table, graph, Cost-Benefit

evaluation formulae)

How many fact sheets will be derived from this deliverable:

(1)

Introduction PLUREL Work Package (WP) 2.4: Spatial Development Strategies and Scenarios (Planning Policy Options). The main purpose of this WP is to provide a case specific input to the stakeholder-based scenario workshops undertaken in WP3.4. In this vein, a number of development scenarios for rural-urban region types have been developed in relation with the generic urban region typologies proposed in WP2.1. Spatially-explicit scenarios depicting future spatial land use relationship development patterns have been carried out and evaluated leading finally to generic rural-urban region development typologies. Existing experience with the success of spatial policies at regional level are systematically analysed and projected onto the defined generic rural-urban region types. By applying the typology of WP2.1, the existing and emerging driving forces for change and development will be considered with an aim of achieving policy option and rural-urban region pattern-driven generic scenarios to account the future dynamics of the driving forces. The relation of the response functions as rural-peri-urban-urban relationship analysis results referred to the generic rural-urban region types with the European rural-urban region classification derived in task 2 of WP2.1. This will allow transferring the results finally to the NUTS3 aggregates to be applied in M4 and M5 linked with the SENSOR SIAT.

Objectives of the Deliverable The major objective of this deliverable is to evaluate the economic costs of major transport infrastructure provisions, particularly rapid rail investments linked with land use management or changes in organisation associated with alternative forms of development. The scenarios that are developed by utilising the MOLAND Model (Task 2 of WP2.4) will result in different activities with certain costs associated with implementing them in the regions (i.e. infrastructure, organisational costs). Tasks 3 and 4 of WP2.4 will develop a generic methodology for the economic evaluation of the scenarios and estimate these internal economic effects at the administrational level of the region of different development strategies and discuss findings with the stakeholders of the case regions during the workshops of M3. Strong emphasis is placed on analysing the effects of different scenarios and planning strategies onto the rural sub-region of rural-urban regions. Dominant patterns of this will be derived for the relevant types of rural-urban regions. The development scenarios (Task 2 of Wp2.4) and the economic evaluation of these scenarios (Task 3 of WP 2.4) will be discussed and tested by practitioners in the case study regions (M3) and finally serve as input to M4. They will be the basis for recommendations, planning tools and SIAT in M5.

Page 7 PLUREL M2.4.8 November, 2010

Structure of the Deliverable The first section of this deliverable is the research context related to the key objectives of the deliverable. The second section is an international literature review for the evaluation methodologies in assessing transport-land-use policies. In the third section, a generic CBA methodology is developed for the impact evaluation of rapid rail investments and land developments in the Plurel Regions. Finally, some key conclusions are provided. 1. Research Context This research addresses the issue of development of a common CBA methodology for evaluating the transport/land-use relationship and contributes to the literature by refining the CBA approach in a rapid rail impact assessment resulting in a compact urban form in comparison with more dispersed forms of development. The principal feature of the paper is the comparison of the evaluation methods of transportation infrastructure obtained from a large number of international studies and the development of a common methodology for the scenario-based impact evaluation of rapid rail infrastructure investments across the EU countries. An EU Commission research programme i.e. EURET (European Research on Transport) constructed a basis for the common research on European transportation related issues; and thereby proposed a wide appraisal spectrum for the evaluation of transportation investments. In the EURET reports, it is noted that a majority of European countries rely on Cost-Benefit Analysis (CBA) in their national appraisal strategies, which provided a basis for generating common appraisal guidelines for the EU countries (see EURET Concerted Action 1.1., 1996). This is the starting point of this study which focuses on the Cost-Benefit Analysis (CBA) approach for evaluating the impacts of rapid rail investments and the consequential forms of urban development. The structure of urban development in the European cities has changed its direction prior to a widespread population growth starting from the 1990s. This rapid growth taking place especially in peri-urban areas has resulted in significant consequences on the development of the urban environment. Most of the cities have experienced dispersed or scattered type of development often referred to as urban sprawl in contrast to their more compact structures which evolved until the 1950s (EEA Report, 2006; UNFPA State of World Population Report, 2007). It is evident that global socio-economic forces interacting with the built environment; and the resultant improvements in accessibility and personal mobility are the main driving forces behind urban sprawl observed in European cities. The European Environment Agency (EEA) in 2006 reported that urban dispersal is now common in countries with high population density and economic activity such as Belgium, Netherlands, France, Southern and Western Germany; and also in regions experienced rapid economic growth such as Ireland and Poland.


Transformation from compact to more dispersed structures such as urban sprawl has significant implications on the urban environment: The sprawl type of development in the built-up area is generally associated with high social, economic and environmental costs. Traffic congestion, automobile dependence, air pollution, social segregation, and decreasing quality of life are often cited as some of the most important problems faced by many large urban metropolitan centres (Boyle et.al, 2004; UN-Habitat Report, 2001; 2004). In an effort to address some of these problems, planners and policy makers have started to give greater significance on the issues of urban sustainable development and urban growth management within the context of sustainability. Here, the main concern is the search for the linkages between urban spatial structure and transportation systems which will achieve sustainable urban form and efficient transport provisions in the future.

Existing literature shows that the relationship between land-use and transportation is complicated since different factors such as urban structure, density, and city size are inputs which determine transportation demand, these in turn will affect the spatial structure, density, and size of the urban area (see Kenworthy and Laube, 1999). Considering this dynamic relationship in the land-use-transportation system, it can be claimed that sustainability of the urban form and efficient transport provisions are two closely interlinked issues. In this regard, sustainability often implies a policy approach minimising travel demand and prioritising an urban form in which different modes of transportation are available as an alternative to the private car. This should generate fewer car trips, and shorter trip lengths through the integration of land usage and transportation. Urban theory may suggest that a compact urban form is preferred to more dispersed patterns in terms of sustainable spatial development and transportation efficiency. This is related to the reduction in travel demand and travel time since most activities are closely located in a compact form (see Hillman, 1996; Bertaud, 2004). By contrast, there are also studies questioning the sustainability of compact form (see Rickaby, 1987; Breheny, 1995) and suggesting that decentralised or polycentric solutions can be as efficient. Reasons advanced for this include that multi-centred urban areas can provide significant transport benefits by locating residences close to employment centres (see Peng, 1997; Williams et.al., 2000).

Related to these theoretical findings, planning research and practice has shown that rail transport systems such as metro-based systems can play a critical role in overcoming the problems posed by the dispersed or sprawl type development patterns (Vuchie, 1991; Newman, 1995; Thornblom and Bengtsson, 1997). Among the competing transit technologies are rapid rail, light rail, and express bus. These developments can provide high quality services in terms of reliability, speed, safety, and reduced travel time and act as a substitute for private car usage. Automobile-oriented planning policies in contrast tend to increase urban sprawl by improving accessibility to urban-fringe locations and by increasing the amount of land required for development (see Litman, 2008). Policies which support rail based transportation and pedestrian activities tend to encourage more compact and mixed developments. As a consequence of this, rapid rail systems such as metro-based transportation have become a preferred policy approach for avoiding road congestion and other detrimental effects of urban dispersal.


Given this framework, this report is aimed at researching emerging methods for the economic evaluation of the land development impacts of rapid rail investments in the context of sustainable urban development in the European Area, particularly the Plurel Regions. 2. Evaluation Methodologies in Assessing Transport-Land Use Policies 2.1. International Comparison of Evaluation Methodologies

The main goal of a transportation infrastructure evaluation is to estimate and evaluate costs and benefits of a given policy to achieve an efficient allocation of resources for optimising general social welfare (OECD, 2002). A Cost-Benefit Analysis (CBA) approach provides a basis for the evaluation of impacts of various transport projects and policy changes in a wide variety of the appraisal work. The Cost-Benefit methodology consists of a quantification of changes in user costs, infrastructure costs, and selected external costs. Evaluation criteria are expressed as monetary values, market prices and shadow prices which are then utilised for the valuation of benefits. Followed by the quantification of benefits through the planning scenarios horizon, benefits are discounted and compared according to criteria i.e. Net Present Value (NPV), Benefit-Cost Ratio (BCR), Internal Rate of Return (IRR) (see Pearce et.al., 2006; Layard and Glaister, 1994; Brent, 2006). Until recently, transportation projects have been subjected to a cost-benefit analysis by using a traditional approach where mainly user benefits were prioritised. Benefits are result from time savings, savings in operation costs, and from reductions in accidents. Traditional cost-benefit analysis is therefore strongly biased towards policies which focus on time savings, and reductions in accident and operation costs. Considering its narrow scope, a complementary cost-benefit framework has increasingly been introduced with the traditional approach, which enables a wider appraisal of transportation issues. Complementary analysis has introduced three main criteria including transportation network effects, environment effects and socio-economic impacts which were previously not included in the traditional CBA. The summary of the contents of this more comprehensive cost-benefit analysis is given in Table 1 together with the traditional CBA. The table indicated that traditional CBA ignores a significant number of external effects which is the main weakness in the standard CBA. Many recent studies in the literature try to identify and incorporate external effects into the standard CBA and can be examined under two main groups. These are 1) General Cost-Benefit studies and 2) Specific analysis on impact-indicator evaluation.

The first group of studies analyse the impacts of transportation networks on the structure of land development by applying a general CBA either in a qualitative or quantitative framework. Some examples of qualitative studies are in Haywood (1999); Bertolini (1999); Sutton (1999); Walton and Shaw (2003); Ryan and Throgmorton (2003); Handy (2005); and Donaldson (2005). In common, these studies questioned the effectiveness of transportation policies considering their impacts on land development


Table 1. Evaluation of Transportation Projects

Traditional CBA Complementary Analysis

USER BENEFITS -Travel time: Time savings are valued on the basis

of opportunity cost -Vehicle operating costs: Cost savings are identified according

to the incremental cost of vehicles i.e. the costs that change with their use

-Safety: Valuation is based on the risk

analysis of user transport accidents associated with a project

TRANSPORT NETWORK EFFECTS -Induced travel: User benefits and costs are valued according to the impact of

project in inducing new trips or causing changes to trip ends or trip times

-Modal shift: Based on modelling and appraisal of modal shifts i.e. switches

between travel modes e.g. road to rail -Reliability: It is related to variation and consistency in travel times and the

reliability related to external factors -Quality of transport service: Ride quality, crowding, ambience, quality of information etc. are

valued by using measures of willingness to pay ENVIRONMENT EFFECTS Environment is assessed considering the impacts on climate

change, acidification, natural resources, biodiversity, air-water quality, noise etc.

SOCIO-ECONOMIC SPILLOVERS The impacts of transportation infrastructure on the economy and the society are more widely. These impacts are assessed based on changes resulting from:

-Employment -Efficiency and output -Social inclusion -Land use effect -Accessibility

Adapted from: OECD, 2002

processes and the urban form. There is much literature on quantitative studies which follows the rules and principles of conventional CBA approach: Different country examples are given in Pearce and Nash (1973); Mills (1977); and Rus and Inglada (1997). The first two are examples of an economic appraisal of inter-urban road and motorway schemes in the UK while the third focuses on a CBA of rapid rail transportation in Spain. A common basis for the evaluation of these different modes of transport is the quantification of costs and benefits through a specified time horizon followed by discounted cash flow analysis resulting in NPV, BCR, and IRR.

The second group of studies focuses on specific indicators to measure and evaluate the costs and benefits of transportation provisions. In this group, there are analyses of the appraisal of transportation projects through examining the effects on real property prices, studies on relationships between transportation investments and land-use development. Relevant studies of this type include Sheppard and Stover (1995); Forrest et.al. (1996); Ryan (1999); and Debrezion et.al. (2007) which research the relationship between property values and transportation provisions. Studies incorporating accessibility dates back to Hansen (1959) with accessibility measures representing the movement of individuals and goods within the complex transportation-land use relationship. There are many contributions to Hansens derivations; and also many empirical studies based on the accessibility impacts of transportation provisions. Some examples can be found in Linneker and Spence (1991); Francisco and Martinez (1995);


Still et.al. (1999); Gutierrez and Gomez (1999); Martinez and Araya (2000); Geurs and Van Wee (2004); and Willigers et.al. (2007).

This body of literature incorporates scenario analysis into the accessibility appraisal of integrated transport-land use strategies. This is developed through deriving accessibility measures, and examinations of the transport-land-use relationship incorporating these accessibility measures on different land development scenarios. Geurs and Van Eck (2003), for example, dealt with accessibility impacts of different land-use scenarios by introducing comprehensive accessibility measures in their integrated transport-land use model for their study area of Netherlands. In a later work, Geurs et.al. (2006) carried out a similar analysis of accessibility impact evaluation of different land-use scenarios for the Netherlands Randstad Area. In contrast to conventional methods, they incorporated job-competition effects into their location- based and utility-based accessibility measures which is claimed to be theoretically more satisfying than infrastructure-based approaches in assessing the total accessibility benefits of integrated transport-land-use strategies. The study by Kwok and Yeh (2004) is another example for integrated transport-land use scenario analysis. Their contribution to previous work is to introduce the modal accessibility gap index which is related to the difference between accessibility indices of public and private transportation. This constructed a base for further studies aiming at analysing the issue of land use development in the context of transportation sustainability.

The literature examined above is relatively effective in quantifying the direct and external effects of transportation provisions on the urban environment. The evidence has shown that it is difficult to express some of the direct and indirect impacts either in monetary or non-monetary values. This may include safety and comfort within the selected transport mode and the associated accident risks; environmental impacts such as noise, air pollution, and climate change; social impacts such as social integration and exclusion; and the land-use impacts such as accessibility changes of the future land-uses. There are various attempts to overcome these difficulties such as incorporating the methods of Multi-Criteria Analysis-MCA (see Nijkamp and Blaas, 1993) into the CBA framework.

In contrast to monetary valuation techniques employed in CBA appraisal, the MCA approach assigns weights to results obtained from a wide variety of techniques, presumably including a high degree of subjective evaluation due to specific expert assessments. For example, Tsamboulas et.al. (1992) used an integrated Cost-Benefit (CB)-Multi-Criteria (MC) Analysis approach in their study which evaluates the impacts of rail investment projects in Greece. Tsamboulas and Mikroudis (2000) introduced a generalised methodological framework for the combination of MCA with CBA which is used for evaluating the impacts of transportation projects by giving specific priority to environmental impacts. Another study by Forslund and Johansson (1995) focused on the appraisal of national road programmes in Sweden by using a similar methodology of integrated CB-MC Analysis. They examine the effects of accessibility changes on the productive capacity of industries in order to explore how and why accessibility changes effect the productive capacities of different regions. Other country specific examples can be found in Gercek et.al. (2004); Banai (2006); and Sharifi et.al. (2006). There are also


PLUREL M2.4.8 November, 2010

more general articles examining the impacts of transportation policies at the international and the European level (see Hey et.al., 1997; Grant-Muller et.al., 2001; and Janic, 2003), which will be examined in more detail in the next section. 2.2. Comparison of Cost-Benefit Methodologies in Europe The appraisal of transport investment proposals became an important issue across the range of European Union (EU) countries prior to the admission of a common transport policy by the European Commission (EC) in 1992. The most significant development in this EU policy focus was the establishment of the Trans-European Network (TEN) programme aiming at a more balanced development over the EU territory by giving importance to regional interconnection, interoperation and access to national and international networks. In relation with the TEN programme, there is wide variety of EU country examples concerning the appraisal of transport investment proposals either in country or regional/European levels. Bristow and Nellthorp (2000) reviewed the national appraisal frameworks for 14-EU countries which take part in one of the EC research projects i.e. the EUNET project (see Table 2). The EUNET project reached to two key conclusions in analysing the national appraisal frameworks of 14-EU countries (see Grant-Muller et.al., 2001): Firstly, the standard CBA approach is used widely among EU countries along with the use of multi-criteria analysis (MCA) and descriptive frameworks by some of the countries in the previous stages of project development. Secondly, the infrastructure investment appraisal is mainly based on a range of socio-economic and environmental objectives due to the fact that transport infrastructure is predominantly publicly owned in the majority of EU countries. Direct impacts including the construction costs, vehicle operating costs, time savings and safety are commonly agreed to be included in a CBA by placing a monetary value on each of them. The environmental impacts included in the evaluation process vary considerably across countries. Although noise and local air pollution are common in all evaluations, their methods of inclusion vary i.e. either monetary valuation or descriptive measures are used. The inclusion and coverage of socio- economic impacts also vary significantly across the countries with some countries including a wide range of impacts, with others excluding various impacts on the basis that they are not additional to the direct project costs and benefits. In a later study, Odgaard et.al. (2005) reviewed the national appraisal practice in EU countries after the recent expansion of the EU to 25 countries in 2004. In line with Bristow and Nellthorps (2000) findings, they stated that CBA is widely used in the assessment of transport projects along with the usage of other methods i.e. MCA, quantitative measures and qualitative assessments in a complementary framework. The authors also examined the inclusion of various impacts and indicators which are covered in each of the countries surveyed where CBA is used. These impacts and indicators are shown in Table 3, from Odgaard et.al. (2005).

Table 2: The Inclusion of Impacts and Evaluation Framework for 14-EU Countries AUS BEL DEN FIN FRA GER GRE IRL ITA NRL POR SPA SWE UK DIRECT IMPACTS

MCA MCACA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA MCA M

Capital Construction Costs Disruption Costs Land and Property Costs

Recurring Maintenance Costs Operating Costs Vehicle Operating Costs Revenues Passenger Cost Savings Time Savings Safety Service Level Information Enforcement Financing/Taxation

ENVIRONMENTAL IMPACTS Noise Vibration Air Pollution-Local Air Pollution-Global Severance Visual Intrusion Loss of Important Sites Resource Consumption Landscape Ground/Water Pollution

SOCIO-ECONOMIC IMPACTS Land Use Economic Development Employment Economic-Social Cohesion International Traffic

CA MCA MCA MCA M

Interoperability Regional Policy

CA M

Conformity to Sector Plans CA Peripherality/Distribution

Key: CBA (Monetised Impacts) Measured Impacts Qualitative Assessment MCA: included in Multi-Criteria Analysis Source: EUNET Project (Nellthorp et.al. 1998)


Table 3: The Inclusion of Impacts in CBA for 25-EU Countries

Con

stru

ctio

n

cost

s

Dis

rup

tion

cos

ts

Cos

ts fo

r m

ain

ten

ance

/ op

erat

ion

Pas

sen

ger

tran

spor

t ti

me

savi

ngs

Use

r ch

arge

s an

d r

even

ues

Veh

icle

op

erat

ing

cost

s

Ben

efit

s to

go

ods

traf

fic

Safe

ty

Noi

se

Air

pol

luti

on-

loca

l/re

gion

al

Cli

mat

e ch

ange

Ind

irec

t so

cio-

econ

omic

eff

ects

Austria Belgium Denmark Finland France Germany Ireland Netherlands

Sweden Switzerland

No

rth

-We

st

UK Czech Rep. Estonia Hungary Latvia Lithuania Poland Slovak Rep.

Ea

st

Slovenia Cyprus Greece Italy Malta Portugal

So

uth

Spain Key: Measured quantitatively, qualitatively or not included Included with a money value Source: Odgaard et.al. 2005 The common impacts and indicators throughout the 25-EU countries include those specified for the 14-EU countries plus maintenance and operation costs, and benefits to goods traffic. Disruption costs, user charges and revenues, indirect socio-economic effects, and environmental impacts including noise, air pollution (local and/or regional levels) and climate are measured qualitatively, quantitatively or sometimes not included in the analysis depending on the country in which the project has taken place.

Other than these, there are also examples of broader international comparisons of transport project evaluation methodologies. Hayashi and Morisugi (2000) carried out research covering the national appraisal methods for transportation projects in the UK, USA, France, Germany and Japan. Their study concludes that all the countries utilise variations of CBA, some of which are complemented by MCA at different stages of project evaluations. The details of methodologies used and the impacts included in the evaluation process are given in Table 4. The authors


concluded that all the countries share some common criteria parameters including travel time savings, safety and impacts on the environment. Time savings and safety are all included in the evaluation process by assigning a monetary value on each. Among the common environmental impacts are those of local air pollution, noise and landscape. In order to avoid double counting, the evaluation methods did not include regional economic impacts, with the exception of the UK, which considered the direct economic regeneration impacts, and in Germany, which estimated the employment effects of transport infrastructure construction and operation.

From the country examples summarised above, it is obvious that a wide variety of research approaches deal with the evaluation of transportation impacts on land use and environment. However due to obvious data difficulties, there are few studies with a capacity of incorporating all of the possible externalities into their analysis. This stems from the fact that it is difficult to quantify most of the impacts of transportation provisions. Some of the impacts and indicators can be represented in monetary values while others can be only expressed in a qualitative manner.

Table 4: Comparison of Impacts and Evaluation Methodologies for the UK, France,

Japan, USA, Germany

United Kingdom

France Japan USA Germany

Methodology Used CBA MCA MCA supplemented by CBA

CBA with MCA and other informal methods

CBA

NI

NI NI NI NI NI NI NI NI NI NI

Imp

acts

an

d I

nd

icat

ors

Incl

ud

ed

in T

ran

spor

t P

roje

ct E

valu

atio

n

Direct Impacts: -Travel Time Savings -Transport Cost Savings -Safety

Environmental Impacts: -Global Impacts -Local air Pollution -Noise -Landscape -Water -Biodiversity Regional Economic Impacts

NI NI NI

Key: Measured quantitatively/qualitatively Monetary value NI: Not Included in the Evaluation Process Adapted from: Hayashi and Morisugi (2000)

There may be also correlations among various indicators such as the positive correlation between land-use accessibility and land values, or the negative correlation between air pollution exposure and area property values. Considering the correlation effects, only a limited number of indicators should be selected in order to prevent the double counting problem in transport policy evaluations. Therefore, selection and confirmation of the most relevant indicators is an important stage within the project evaluation process. In the literature, there are also various studies of CBA evaluating transportation policy changes and investment decisions by questioning the relevance of impacts and indicators included in the evaluation process. Table 5 summarises some of this empirical work which uses sensitivity analysis approach to evaluate the consistency



of their results. As an example, Odeck (1996) focused on ex-post evaluation of the regional road investments in Norway, Janic (2003) carried out a MCA for the evaluation of high speed rail and air passenger transport across the European Region, and Gercek et.al. (2004) performed a MCA for analysing the alternative rail transit networks in Istanbul. These studies share a number of impacts and indicators which are similar to each other despite the existence of differences in their policy evaluation goals and appraisal methodologies. The common impacts included in these studies are: the cost of transportation infrastructure investments (land, development and capital investment costs), vehicle operation costs, travel time savings, and safety. All of these studies incorporated environmental impacts but with a substantial variation across countries. Energy consumption and local air/noise pollution levels are widely used in many of the studies while climate change indicators are not widely included. The inclusion of socio-economic impacts also vary significantly across the studies with some research including a wide range of impacts, and with others excluding these impacts due to the difficulties in data accessibility and problems in quantification.

In general, these studies conclude that it is important to consider all related impacts of transport policy changes in the evaluation process. However, specific emphasis should be given for the choice of number and type of criteria, and the indicators for particular criteria to be involved in the decision making process. The results of these studies show that considerable care should be taken in order to minimise the problem of double counting and to reduce the impacts of overestimation of benefits and costs in the transport policy evaluations. The studies summarised provide a background for impact-indicator evaluation in the Cost-Benefit methodology. The European Commission (EC) has set common guidelines for Cost Benefit Analysis of Transport Investment Projects. The most recent report was published by EC in 2008, which is a Guide to Cost Benefit Analysis of Investment Projects for a contribution to shared European wide project appraisal guidelines in a broad conceptual framework (European Commission Final Report, 2008). This report provides a basis for the present study in generating a common methodology for the EU countries for CBA evaluation of the rapid rail investments and the urban form relationship. The methodology is examined in detail in the next section.

Table 5. Summary of the Selection Criteria for the Impacts and Indicators from Different Studies of CBA

Location, (Author, Year Published)

Evaluated Transport Policy (Method of Evaluation)

Impacts and Indicators Included in the Evaluation

Results from the Selection of Relevant Impacts and Indicators

Norway (Odeck, 1996)

Ex-post evaluation of regional road investments (CBA, logit analysis, socio-economic analysis)

Direct Impacts: -Construction costs (M*) -Vehicle (and systems) operation costs (M*) -Travel time savings (M) -Safety (M*)

Environmental Impacts: -Local air/noise pollution (M) plus accident risks and climate change are evaluated in socio-economic analysis

-Benefit-Cost ratio (B/C) does not contain some very important environment elements because of the difficulties in monetary valuations. This implies that B/C does not take account of important issues such as distributional aspects, and if such effects are so great, then B/C as a ranking criterion should not be warranted (see Odeck, 1996: 138).

-It can be suggested that quantification of more environmental effects in monetary terms will strengthen benefit-cost ratio as a ranking criteria (Odeck, 1996: 138).

Europe (Janic, 2003)

High-Speed Rail (HSR), Trans-Rapid Maglev (TRM), Air Passenger Transport (APT) (Multi Criteria Analysis-MCA)

Direct Impacts: -Construction costs (M*) -Vehicle (and systems) operation costs (M*) -Safety (M*) -Quality of transportation service (M)

Environmental Impacts: -Energy consumption (M) -Local air/noise pollution (M)

Socio-Economic Impacts: -Socio-economic growth (M) -Social inclusion (M) -Accessibility (M) -Traffic congestion (M)

- Sensitivity analysis indicates that the exclusion of various combinations of impacts from the evaluation of transport projects changes the results for project rankings. The reason is related to the existence of trade-offs between various interest groups. The cases considered in the sensitivity analysis comprise several criteria for users, community members, operators, investors and policy makers.

-The results are highly sensitive to changes of inputs, and this raises the

question of choice of the number and type of criteria, and indicators for particular criteria to be involved in the evaluation process (Janic, 2003: 509).

Istanbul, Turkey (Gercek et.al., 2004)

Evaluation of three alternative rail transit network (i.e. RTN1, RTN5, RTN6) proposals (MCA)

Direct Impacts: -Construction costs (M*) -Vehicle (and systems) operation costs (M*) -Travel time savings (M) -Safety (M*) -Quality of transportation service (M)

Environmental Impacts: -Climate change (M)

Socio-Economic Impacts: -Accessibility (M)plus some other specified impacts

related to system planning and policy criteria

-Sensitivity analysis was carried out for both trend and master plan scenarios by considering several cases which are related to financial criterion, economic criterion, system planning criterion, and policy criterion.

-The rankings of the alternative rail transit networks under both scenarios are sensitive to changes of the criterion included in the analysis. This result is consistent with Janics (2003) conclusion that the selection of relevant criteria and indicators is important in the decision making process.

Key: (M): The impacts included in a CBA with a money value; * impacts that are common within all studies.


3. Methodology for Evaluating the Land Development Impacts of Rapid

Rail Investments 3.1. Specification of Impacts and Indicators Given the literature on the comparison of international and EU country examples for the transport policy evaluations, common impacts are specified for the appraisal of rapid rail investment projects and consequential land development impacts in the European wide area. The selection of related indicators are based on four main types of criteria including direct impacts of transportation infrastructure provision, socio-economic impacts, transportation network effects, and energy and environmental impacts. The list of the suggested impacts and indicators are summarised in Table 6. The impacts and indicators have been determined for this study on the following basis. 3.1.1. Direct Impacts Costs and capital investments of transportation infrastructure constitute a significant part in project evaluations, and therefore, they are incorporated in all of the transport evaluation studies. The infrastructure costs of rapid rail projects will be included in CBA with a monetary value estimated on costs including: land, railway infrastructure, stations, civil engineering works, planning and design, and operational systems. 3.1.2. Socio-Economic Impacts Transport infrastructure investments can contribute to economic growth by expanding the stock of capital, increasing labour productivity; and therefore, ensuring more efficient production (Aschauer, 1989; Munnell, 1992). As a result, real income levels and standard of living is expected to rise. Investment in transportation and other services is also important in encouraging socio-economic growth and in contributing to solving the problems of social exclusion and poverty. However, the literature indicates that the magnitude and significance of these effects are not clear (OECD, 2002: 18). In Banister and Berechmans (2000) explanation, there is little evidence that transport infrastructure investments at the regional level strengthen the local economy over longer term. The existence of some specific factors i.e. regional connectivity, network effects, and complicated trip patterns is the other problem which makes it difficult to perform the analysis of the socio-economic distribution of benefits (see Berechman and Paaswell, 2005). Following this initial research and discussions on data availability indicating difficulties in the monetisation of specific impacts (due the existence of complicated relationships with the other impacts) and issues of double counting; some of the socio-economic impacts were eliminated from the analysis as shown in Table 6. For instance, socio-economic development benefits are not taken into consideration due to the fact that literature is not clear on the degree to which economic development benefits stems from the transportation investments (see for example, Knight and Trygg, 1977; Dyett et. al., 1979; Cervero and Landis, 1997). The general argument in the literature is that



Table 6. Summary of Selected Impacts and Indicators for the Evaluation of Land-use

Impacts of Rapid Rail Investments

Impacts/Indicators1 Suggested Indicators/Impacts for the European Area

1. Direct Impacts of Transportation Infrastructure Provision: -Transportation Facility Land Values -Development Costs/ Capital Investments -Adjacent Property Values

Costs/ Capital Investments of Transportation Infrastructure (M)

2.Socio-Economic Impacts: a. Land Development Impacts: -Green Space Preservation -Public Service Costs

Costs of Providing Public Services (M)

b. Transportation- Related Impacts: - Savings in Vehicle Operation Costs - Travel Time Savings - Reduction in Risk of Accidents - Comfort and Convenience - Traffic Congestion Effects

Vehicle Operation Costs (M) Travel Time (M) Accident Costs (M)

c. Socio-Economic Development Benefits: -Affordability (Housing) -Affordability (Transport) -Social Inclusion -Socio-Economic Growth -Land-Use/Transport Accessibility -Area Property Values

Area Property Values (Q)

3. Transport Network Effects: -Reliability/Quality of Transport Service -System Operating Costs

System Operating Costs and Revenues (M)

4. Energy and Environmental Impacts: -Climate Change Emissions (Greenhouse Gas Emissions) -Air/Noise Pollution Exposure - Energy Consumption

CO2 Emissions(M) Local Air Pollution (M) Local Noise Pollution (Q)

Note: (M) denotes the indicators with a monetary value while (Q) representing the qualitative or quantitative assessment

benefits from economic growth are mainly represented in travel cost savings which results from improvements in the efficiency of the transportation system. Travel cost savings include the savings in travel times, vehicle operation costs and costs of accidents, reduction in traffic congestion etc. Some studies argue that the inclusion of economic growth effects will lead to double counting since economic growth benefits are the manifestation of capitalised travel cost savings (OECD, 2002: 19). OECD (2002) reports that only travel cost savings should be regarded as benefits from transport infrastructure investments unless perfect competition is satisfied within the markets. Based on the reasons explained above, socio-economic effects of rapid rail investments such as metro and high speed rail projects are represented by a limited number of impacts (see Table 6). These are defined as transportation-related impacts-including travel time savings, savings in accident and vehicle operation costs; development benefits-including area property values; and land development impacts-including public service costs. Their details will be examined in the following sub-sections.

1 Source: Janic, 2003; Litman, 2008.

(a) Travel Time Savings: CBA is based on the assumption that users of the transportation system have a willingness to pay price/value for undertaking trips. Hence, if the travel time is shortened, they can appreciate the value of saved time having a positive effect in cost-benefit assessments. Savings in travel time is an important indicator in transport project appraisals due to the fact that it captures economic growth effects-stemming from travel time savings of labour; traffic congestion effects-reflecting the ease of travelling prior to a considerable transfer from private car usage to rapid rail-based transportation. Accessibility changes in land use-indicating savings in various travel costs and the resultant easiness of access reflect a shift from more dispersed developments to more compact urban form. Here it is important to mention that the direct short term effect of rapid rail projects is on existing travel pattern while the long term effect is potentially on urban development pattern. (b) Savings in Accident Costs:

It is widely accepted that public modes of transport have lower accident rates than private car trips. Litman (2000) states for the Canadian case, the number of accidents per public transit vehicle is 5% of the corresponding rate for car travel trips. Among the alternative public transport modes, metro and other high speed rail systems can be considered as the most reliable ones due to the low likelihood of fatal accident occurrence. Therefore, a major shift from car-based transportation to metro-based systems can contribute to considerable amount of savings in (fatal) accident costs. Accident cost savings can also be considered as socio-economic benefits which contribute to social and economic well-being by reducing the injury and fatality rates and the resultant losses in labour force. (c) Savings in Vehicle Operation Costs: Vehicle operating cost savings are associated with user benefits indicating the shift of travel from private car to public transit-i.e. rapid rail transport in our case. At a minimum, the shift from private car to an efficient rapid rail-based system can save fuel and oil, which can be considered to have important impacts on energy consumption and environment pollution levels. In addition, there are costs of depreciation, insurance and parking which are increasing with car usage. In addition, there are increases in repair and maintenance costs, reductions in vehicle resale value, increases in parking and traffic costs etc. (see Litman, 2000). (d) Area Property Values:

Empirical evidence has shown that introduction of a transit system results in increases in property values along the transport corridors (see for example, Armstrong, 1994; Benjamin and Sirmans, 1996; Nelson, 1998). These studies pointed out that the results presumably indicate the short term impacts of the introduction of a new transport system rather than the long term market effects. The degree to which increases in property values stems from transport investments is not clear due to the existence of


other forces influencing real property markets. However, it can be suggested that transport impacts on economic development, on land-use and transportation accessibility; and the resultant effects on property markets are reflected in property values, despite the existence of price distortions and the imperfect knowledge in real property markets. It is also important to highlight is the existence of relocation effects stemming from local development captures the gain achieved by one area is lost by another area in the region implying a net zero effect at the national level. Therefore, it is suggested that effects on local development reflected in adjusted property values are not to be taken into account in CBA but can be evaluated separately subject to a qualitative assessment. (e) Public Service Costs:

Dispersed or sprawl type of development necessitates providing public services to the low density population reflecting increases in infrastructure and public service costs (see Litman, 2008). Frank (1989) showed that municipal capital costs of residential service provision increased considerably with dispersed development. This can be a significant indicator in the CBA reflecting the change in public service costs following the shift from dispersed to more compact developments after the introduction of rapid rail-based transportation systems. 3.1.3. Transport Network Effects Related to the transport network effects, the operating costs and revenues of the transportation infrastructure constitute a significant part in project evaluations, and therefore, they are incorporated in all of the transport evaluation studies examined previously. The system operating costs and revenues will be included in CBA with a monetary value based on cost and revenue estimates. 3.1.4. Energy and Environmental Impacts

It is widely accepted that changes in the climate system is effected by human-induced emissions i.e. greenhouse gas emissions such as carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O). Although transportation is not the only contributor to the rising levels of greenhouse gas emissions, it is the fastest rising contributor to the problem (Commission of the European Communities, 1990). The dramatic increase in the private vehicle ownership, which is also encouraged by the provision of large scale urban motorways, has led to air pollution, noise, and increasing amounts of transport-related energy consumption. In contrast, on average, rail produces less carbon dioxide per passenger and tonne kilometer than road transport. Although there are examples of counter arguments, the general research has been in favour of compact urban form in comparison to the more dispersed urban developments largely on the grounds of transportation energy savings (see Breheny, 1995). Energy and environmental impacts i.e. energy consumption, air/noise pollution exposure, climate change emissions (greenhouse gas emissions) are all important for the Cost-Benefit


evaluation process. Since energy consumption effects are also represented in vehicle operation costs, the only impact which will be monetised in the present analysis is the cost savings in carbon dioxide emissions. Based on data availability, local air/noise pollution can also be included in the CBA either by qualitative or quantitative evaluation. 3.2. Implementation of CBA for Impact Evaluation of Rapid Rail

Investments The impacts and indicators which were selected for the CBA can be quantified by utilising the appropriate country specific values published in various studies, reports and national project appraisal guidelines. In relation with these studies, the values and parameters for the appraisals of capital costs, public service costs, accident rates, vehicle operation costs, system operating cost and revenues, travel time and costs of carbon dioxide emissions and local air pollution involve a large number of working steps for which particular data input is required. Below is the brief explanation of the evaluation process. 3.2.1. Scenario Analysis for the CBA Scenario analysis comprising a baseline scenario (reference scenario) which is compared with several alternative scenarios can construct a base for the impact evaluation of rapid rail investments in the European wide area. The research is based on the consideration of two scenarios: A baseline-do minimum and an alternative with rail scenario. According to the do-minimum scenario, it is assumed that the urban area would continue to grow with the present trends and there would be only sufficient maintenance and renewal investments to maintain the existing infrastructure. Therefore, rail services in future years would be broadly comparable to the current level leading to a dispersed urban form. Considering land development impacts of rapid rail investments, it can be expected with rail scenario will generate more compact forms of urban development. By encouraging a transfer from private transport, rapid rail investments can assist in improving accessibility and land-use change which supports compact and mixed developments. The potential for efficiency and environmental impacts will be examined through the impacts and indicators specified in the previous sections for the European Region. The process of economic appraisal of the rapid rail investments in comparison with a do minimum scenario can be summarised by the following steps:

Forecasting transportation demand with a transportation model consisting of: - Forecasts of future growth and land-use change (population,

employment, economic activity, income) - Assumptions of the supply side of transportation activities - Assumptions and scenarios for external conditions


- Four stage method: trip generation, spatial distribution of trips, modal split and modal assignment

Quantifying, where possible, incremental costs and benefits relative to the do-minimum scenario;

Identifying unquantifiable impacts; Adjusting quantified costs and benefits for:

- inflation - relative price changes - risk and optimism bias

Undertaking sensitivity analysis; Calculating the net present value.

3.2.2. Specific Issues in Impact-Indicator Evaluation In accordance with the estimations from the transportation model utilised in the subject country and the parameters/values specified for capital costs, accident costs, vehicle (and system) operation costs, public service provision costs, travel time, carbon dioxide emissions and local air pollution, Table 7 in the following page presents the related data requirements for the scenario analysis of do minimum and with rail cases. Based on the impact evaluation data given in Table 7, some specific issues in impact valuation methods are then explained. 3.2.2.1. Capital Cost Estimation of Rail Investments A broad estimate of the capital costs for any rapid rail provisions is obviously obtained at project initiation stage. These estimates are expressed in constant prices and are generally built up using unit cost data, expert advice and experience of similar projects in the past. Given the inherent uncertainty at this stage, the detailed risk analysis is necessary to reduce uncertainty around the expected infrastructure costs of rapid rail projects. In the literature, there are examples showing that cost escalations are common in transport infrastructure projects, particularly in urban rail projects. For instance, Flyvbjerg et.al. (2002) showed that transport infrastructure projects worldwide experience large construction cost escalations; and among them, rail projects incur the highest cost escalation. The average cost escalation for rail projects is 44.7%, followed by fixed-link projects (bridges and tunnels) by 33.8% and road projects by 20.4% (see Flyvbjerg et.al., 2002). In a later study, Flyvbjerg et.al. (2004) also found that it is the length of the implementation phase which strongly leads to larger percentage cost escalations. Economic and demographic factors, technology, and differences between forecasted and actual operating service plans are considered as the main reasons for uncertainty in project cost estimations. This implies large underestimation of costs resulting in inflated figures and benefit-cost ratios from the CBA, which ends up with misleading conclusions in project evaluations (Flyvbjerg, 2007).


Table 7. Impact Evaluation Data for Rail-Based Infrastructure Investments: With-Rail vs. A Baseline Scenario Approach

Impacts/Indicators Impact Evaluation Data Requirements of With-Rail Scenario vs.

Baseline Do-Minimum Scenario

1. Capital Costs of Rail Infrastructure Investment

Direct construction cost estimates include the following: -Land acquisition costs -Railway infrastructure -Stations -Civil engineering works -Operational systems -Planning and design

2. Provision of Public Services

Future estimated numbers for new residential development (numbers of new housing units) in the case study area within the appraisal period specified for rapid rail investments

3. Accident Rates/Future Accident Risks

Three types of data are required: -The most recent data related to the number of personal fatality, serious injury,

and minor injury accidents along the catchment area of the newly proposed rail line

-Estimated numbers for future accident risks from the national and local accident rates and trends -Quantification of changes in the number of fatalities, serious injuries, and slight

injury accidents due to a rapid rail investment by using country specific risk functions

4. Change in Road Vehicle Operation Costs

For the calculation of the economic benefits (costs) associated with vehicle operating costs, two types of data are required: -Demand: the number of private vehicles (cars) making a particular origin-

destination trip for the do minimum scenario and the alternative with rail scenario ( peak/off-peak traffic flow data for the baseline and alternative scenarios)

-Vehicle kilometres-total change in vehicle kilometres from the local highway network for the do minimum and with rail cases

5. Change in Travel Time

Estimates related to; -Travel time-change in travel time for private vehicles (cars) in peak/off-peak

traffic for the baseline and with rail scenarios -Demand: peak/off-peak traffic flow data for the baseline and with rail cases

6. Rail Operating Costs and Revenues

-Expected operating pattern and service frequency of newly proposed rapid rail system

-Key characteristics (route length, journey time, peak and off-peak headway etc.)

7. Change in Area Land Values

-Amount of greenfield/empty land within the catchment area of new rail line (in hectares).

-Amount of other land-uses i.e. commercial, industrial, residential and mixed-uses within the zoning suitability for development catchment area of new rail line (in hectares).

8. Change in CO2 Emissions/Local Air Pollutants

-Total change in greenhouse gas emissions (i.e. CO2 , in particular) and local air pollutants (NOx, SO2, PM2.5 etc.) for the baseline and with rail cases.

Practical methods for risk assessment and management in urban rail projects are provided in Flyvbjerg & COWI (2004) where UK transport projects were grouped and evaluated through the optimism bias up-lifts. The idea behind the optimism bias up-lifts is that the projects are classified into a number of distinct groups in order to establish a probability distribution for each group with the available data on actual budget increases in completed historical projects...This will provide the link between the observed ex-post cost increases for past projects and the required up-lift for a new project... which is referred to as optimism bias up-lifts (Flyvbjerg & COWI, 2004: 10).


The optimism bias up-lifts specified for urban rail projects in the UK are given in Table 8. The table, for instance, shows that if the risk of cost overrun is less than 30 percent then an up-lift of 51 percent will be used for the correction of optimism bias in capital costs of urban rail projects.

Table 8. Capital Expenditure Up-lifts in Constant Prices for Urban Rail Projects Applicable optimism bias up-lifts

Types of Projects 50% percentile 60% percentile 70% percentile 80% percentile 90% percentile Metro Light Rail Busses on Tracks Conventional Rail High Speed Rail

40%

45%

51%

57%

68%

Source: Flyvbjerg & COWI, 2004: 32

Based on these studies, adjustments for optimism bias should be added to the initial cost estimations in any of the European countries where rapid rail projects are taken place. However, a detailed risk analysis can also reduce the uncertainty in cost estimations; and therefore, the need for optimism bias adjustments can be reduced. For the EU countries other than UK, HEATCO (2004) (a EC 6th Framework Research Programme) suggests an average of 34% capital expenditure up-lift for the rail projects based on the results in Flyvbjerg et.al. (2002) representing average cost escalations in Europe. 3.2.2.2. Valuation of Traffic Safety It can be argued that any limited economic analysis underestimates the value of human life to family, society etc. However, for the purpose of this research an input based upon conventional economic statistics is used. The statistical value of human life (SVHL) has been determined using two methods: Human capital and stated preferences. The former method measures discounted loss of production due to the injury or death of the individual member of the workforce while the latter is used for estimating willingness-to-pay (WTP) values of individuals-indicating their preferences to reduce the risk of being injured or die in an accident. The human capital approach is distinguished by Weisbrod (1961) as to include two separate measures. The first is based on the discounted value of persons future lifetime production-measured by his earnings- under the assumption that production is equally valuable for everyone regardless of their consumption levels. Alternatively, a value of someones life can be measured by the effects of his death on the welfare of the other people who would survive him. This second approach gives more importance on the consumption levels of the living population and measures the value of life by discounting the excess of persons expected future production over his future consumption. The components of the human capital approach were brought together into an overall value with the widespread application of willingness-to-pay methods. Considering its wide usage, Grant-Muller et.al. (2001) identified some factors which may contribute to the variations of WTP values across the EU countries. These include: 1) income (per capita) variations among member countries influencing individuals WTP values for safety 2) cultural differences which have impact on both governments attitudes and individuals tastes and preferences for


accident reduction measures 3) inclusion or exclusion of some costs i.e. legal costs, other public sector costs etc. 4) differences in the nature of measurement methods i.e. problems of bias in WTP measures. Based on the existence of these factors, HEATCO (2004) suggests using the human capital measures and WTP studies carried out in the countries for which they are applied. In the absence of these estimates, the values suggested by another EC Research Project, UNITE can be applied (see HEATCO D:5, 2004: 88). The case studies in UNITE project are analysed by using the marginal external cost approach. These values depend on purchasing power, accident risk, and risk elasticity of the country that is examined. Considering these differences, UNITE project also set recommendations which allow adjustments to EU member countries of a common European set of values (see Lindberg, 2003). The adjusted values for the EU countries recommended by HEATCO are provided in Table 9. Table 9. EU Values per Casualty (i.e. per person injured or killed) Avoided

(2002 values, Purchasing Power Parity, factor prices2)

Accident Type Country Fatality

Million

Serious Injury Million

Slight Injury Million

Austria Belgium Bulgaria Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Norway Poland Portugal Romania Slovakia Slovenia Spain Sweden Switzerland United Kingdom

1.685 1.603 0.573 0.798 0.932 1.672 0.630 1.548 1.548 1.493 1.069 0.808 1.836 1.493 0.534 0.575 2.055 1.445 1.672 2.055 0.630 1.055 0.641 0.699 1.028 1.302 1.576 1.809 1.617

0.2301 0.2432 0.0789 0.1055 0.1252 0.2069 0.0844 0.2059 0.2163 0.2065 0.1397 0.1084 0.2326 0.1919 0.0723 0.0785 0.3202 0.1835 0.2215 0.2883 0.0845 0.1410 0.0871 0.0964 0.1335 0.1618 0.2313 0.2480 0.2089

0.0182 0.0157 0.0056 0.0077 0.0091 0.0162 0.0061 0.0154 0.0162 0.0167 0.0107 0.0079 0.0178 0.0147 0.0052 0.0057 0.0193 0.0137 0.0179 0.0207 0.0061 0.0097 0.0062 0.0069 0.0098 0.0122 0.0166 0.0191 0.0166

Source: HEATCO D:5, 2004. European Commission Final Report, 2008-refer to JASPER for Bulgaria and Romania

2 Consumption and production are subject to a number of indirect taxes and subsidies. These are

reflected in the calculation of market prices where items are valued as if they are being traded in consumer markets with all indirect taxes and subsidies in place (UNITE, 2001: 2). By contrast, in factor cost valuation, indirect taxation and subsidies are not taken into account. In principle, cost or benefit accounts could be expressed in either market prices or factor costs. Nevertheless, UNITE (2001: 3) noted that the majority of the items on the cost side of the account are conventionally measured at factor costs, and this is the side of the accounts that will be used and studied the most...Therefore, factor costs are suggested to be used as a unit in the UNITE accounts. Based on this, factor costs will also be utilised in the current study for computing the costs and benefits.


Increasing values for future years will be based on estimation of country specific rate of growth in real GNP (or GDP) per person employed. In relation, HEATCO (2004) also recommended a default inter-temporal elasticity to GDP per capita growth of 1.0. In contrast to cross-sectional elasticity, inter-temporal elasticity to GDP considers underlying changes in both individuals preferences and technology over time. 3.2.2.3. Vehicle Operation Costs (a) Road Vehicle Operation Costs:

The unit vehicle operating costs are clearly dependent on the prices of goods within a region (i.e. price of oil, vehicle parts etc.), the transport network characteristics, and vehicle utilisation. However, operating cost relationships for road vehicles is more generic and transferable between countries (see HEATCO D:5, 2004). For instance, fuel and non-fuel consumption parameters for private car and busses can be computed by the following formulas in (4) and (5), respectively: C= a + bV + cV2+dV3 (4) C= a1 + (b1/V) (5) where C is the cost in cents per kilometre, V is the average link speed in kilometres per hour, and a, b, c, d, a1 and b1 are the parameters defined for each vehicle category. As an example, UK values for fuel consumption parameters are shown in Table 10 for the year 2002. Post-2002 values can be computed by using the suggested growth factors3 and are monetised by applying the market price of fuel in any specific country. The non-fuel cost formula in (5) can be adopted to the country case by using the Purchasing Power Parity (PPP) conversion, and then inflated to the post-2002 values by using the Consumer Price Index (CPI) for the related period. The non-fuel consumption parameters are given in Table 11 again representing the 2002 UK values. Table 10. CBA Fuel Consumption Parameters in litres/km (2002, UK values)

Fuel Parameters Vehicle Category a b c d

PETROL CAR 0.18804764 -0.00437947 0.00005068 -0.0000001691 DIESEL CAR 0.14086613 -0.00285222 0.00002867 -0.0000000693 AVERAGE CAR 0.17813952 -0.00405874 0.00004606 -0.0000001481 PSV 0.63466867 -0.01898970 0.00027431 -0.0000012161

Source: Department for Transport UK (2009)

Table 11. CBA Non-Fuel Consumption Parameter Values in pence/km (2002, UK

values) Parameters Vehicle Category

a1 b1 AVERAGE CAR 3.030 19.048 PSV 24.959 569.094

Source: UK Department for Transport (2009)

3 See Department for Transport UK (2009)


(b) Rail Operating Costs: Railway costs can be analysed as fixed and variable costs. Fixed costs are incurred costs for operation, maintenance, and replacement which are independent of traffic volume changes. Variable costs, on the other hand, are those which depend on traffic volume. The elements of the variable unit operating costs for railways are specified by World Bank in its 1995; 2005 Infrastructure Reports, and given in Table 12 below: Table 12. Elements of Rail Operating Costs Cost Type Vehicle Ownership Costs Locomotives/Coaches Replacement Cost Vehicle Maintenance Costs Locomotives/Coaches Unit cost/loco. Unit-km Unit cost/coach-km

Unit cost/coach-year Transportation Costs Train fuel Unit cost (gross ton-km) Train crew wages Actual by cost centre Locomotive crew wages Actual by cost centre Station operations Unit cost/train-km Billing Unit cost/car load Other Unit cost/train-km Source: Anderson (1995), World Bank (2005)

In relation with Table 12, rapid rail operating cost estimations require three main sets of data including:

-Crew Wages (drivers and operation staff, working time directives) -Maintenance Costs (rolling stock, equipment, security, insurance) -Power Usage Costs (power traction/auxiliaries, power depots and stations).

3.2.2.4. Value of Time There are two categories of time that are involved for valuing travel time savings of passengers i.e. working and non-working, the former of which is related to commuting for working purposes while the latter is comprising all other non-working activities. Travel time is evaluated by standard values of time for each vehicle category assuming a constant marginal unit value of time regardless of the time saved and the variance of income levels of individuals. The valuation is based on three sources. First, cost saving approach, which considers wage rates as a measure of productivity loose or gain by the labour force, is selected as a minimum approach for the valuation of work time savings (see HEATCO, 2004). Second, a new methodology proposed by Hensher (1977) can be suggested to be used for the valuation of work travel time. According to Hensher (1977), work trips have two components: a business component assuming that not all travel time is unproductive, and a private component presuming that not all savings are transferred to extra work but utilised for non-work purposes. Other than these, a further approach is based on the idea of willingness-to-pay (WTP) which is used for the valuation of both all


non-work trips and the private component of work trips. Stated preference and revealed preference are the two methods used in WTP analyses for the purpose of generating a differentiated structure of values of time-both work and non-work.

In this study, national values for net average hourly wages for work time valuation are used, and for the non-work time valuation use the values in national value of time studies published in any country of interest. There are various countries that have already published national value of time studies including the Dutch national value of time studies 1986-1995 (Hague Consulting Group, 1996), Norwegian value of time study (Ramjerdi et.al., 1997), national Swedish value of time study (Alger et.al., 1996), value of time research in Finland (Pursula and Kurri, 1996) and the UK value of time study 1994 (Hague Consulting Group, 1994) (references derived from Wardman, 1998; Nellthorp et.al. 2001). Furthermore, HEATCO (2004) also identified national values for work and non-work travel time savings by utilising meta-analysis models to estimate the travel time values for each country (see Table 13). In the absence of country specific studies on national time values, the values derived from HEATCO meta-analysis can be used as shown in Table 13. In order to account for the income variations in the value of time savings across population, HEATCO (2004) also recommended a cross-sectional elasticity to income of 0.5 for work trips and 0.7 for non-work trips considering the absence of country specific values. For measuring future growth in value of time, it can be suggested using the annual growth rates in GNP per person employed for any country of interest. Table 13. EU Values for the Travel Time (2002 values, per passenger per hour,

factor prices)

Work Passenger Trips

Non-work Passenger Trips

Commute Other

Country

Bus

Car, Train Bus Car, Train Bus Car, Train

Austria Belgium Cyprus Czech Republic Denmark Estonia Finland France Germany Greece Hungary Ireland Italy Latvia Lithuania Luxembourg Malta Netherlands Poland Portugal Slovakia Slovenia Spain Sweden Switzerland United Kingdom EU (25 Countries)

22.79 22.03 16.92 11.45 25.31 10.30 22.59 22.23 22.35 15.59 10.85 23.97 20.57

9.41 9.29

30.51 14.96 22.47 10.33 15.52

9.92 15.08 17.93 24.32 26.47 23.29 19.11

28.40 27.44 21.08 14.27 31.54 12.82 28.15 27.70 27.86 19.42 13.52 29.87 25.63 11.73 11.58 38.02 18.64 28.00 12.87 19.34 12.36 18.80 22.34 30.30 32.97 29.02 23.82

7.42 7.07 7.32 5.31 7.82 4.60 7.00

10.11 7.42 6.40 4.66 7.74 9.38 4.20 4.09

11.00 6.02 7.17 4.56 6.18 4.25 7.42 7.87 7.57

10.36 7.69 7.83

10.32 9.84

10.18 7.38

10.88 6.40 9.73

14.06 10.32

8.90 6.48

10.77 13.04

5.85 5.69

15.30 8.37 9.97 6.34 8.59 5.91

10.33 10.94 10.53 14.41 10.70 10.89

6.22 5.93 6.14 4.45 6.56 3.86 5.87 8.47 6.22 5.37 3.91 6.49 7.86 3.52 3.43 9.22 5.05 6.01 3.82 5.17 3.57 6.22 6.59 6.35 8.69 6.46 6.56

8.65 8.26 8.53 6.18 9.12 5.36 8.16

11.79 8.65 7.46 5.44 9.03

10.94 4.90 4.77

12.83 7.02 8.37 5.32 7.20 4.96 8.66 9.18 8.83

12.08 8.98 9.13

Source: HEATCO D:5, 2004


3.2.2.5. Environmental Impacts An environmental impact assessment will usually be required for any significant rapid rail infrastructure development in the European Region. In relation with this, three environment impacts are considered as given in Table 2:

Global air pollution Local air pollution Noise pollution

Global air pollution which is mainly caused by carbon emissions can be calculated from the values attributed to the carbon dioxide by using the following three methods: (a) EU Emissions Trading Scheme (ETS) Futures Price:

Through the establishment of the European Union Trading System (EU-ETS) for carbon dioxide emission permits, a price for carbon emissions has been developed. However, there are some problems with its usage for the valuation of transportation-related carbon emissions. In a study by Tol and Lyons (2008), the ETS is defined as a spot market and does not consider the expectations of the future. In addition, Curtin (2008) reported that EU-ETS covers approximately 41% of total EU carbon dioxide emissions which include only a limited number of sectors and exclude transport, housing, agriculture and waste sectors from the EU-ETS (World Bank, 2008).

(b) Marginal Abatement Cost of Carbon: It is the cost of reducing emissions by one unit at a given emissions level (Stern, 2007). Marginal abatement cost of carbon is absolutely country specific since each country has its specific carbon dioxide reduction targets; and even in one country, targets may differ across various sectors (Maibach et.al. 2007).

(c) Social Costs of Carbon(SCC):

Tol and Lyons (2008) defined the social cost of carbon as the welfare loss due to a small increase in carbon emissions. This relates to the net present value of climate change impacts over the next 100 years (or longer) of one additional tonne of carbon emitted to the atmosphere today (Watkiss et al, 2005).Due to the uncertainty of future emissions and climate change, there is wide uncertainty among the SCC estimates. Kuik

Date post:	15-Sep-2015
Category:	Documents
Upload:	hajarath-prasad-abburu
View:	214 times
Download:	1 times

D245 plurel

Documents